Benefit changes could cost UK pensioners a fortune

The government is to introduce changes to pension age state benefits that will impact older couples.

The decision will affect couples where one partner has reached state pension age and one hasn't. It will impact when they can start to claim.

Under current rules, married couples are able to transition from working age to pension age benefits as soon as the oldest spouse reaches state pension age.

However, from 15th May this year the couple will be able to transition only once the youngest of the pair reaches state pension age.

The move will impact benefits including pension age housing benefit, universal credit and pension credit.

The older party, however, will not need to meet work-based requirements to claim.

The DWP says that the change would ensure that younger people do not get additional benefits as a result of having an older partner.

However, pension firm Royal London claims that the change could cost some couples more than £7,000 a year.

Steve Webb, director of policy for Royal London and former pensions minister, says: "This change to the benefit rules means that some couples could lose thousands of pounds depending on whether their claim falls a day before or a day after the May deadline.

"People who may be affected deserve to know about this change and not have it sneaked out on a day when ministers were no doubt hoping that everyone's attention was directed somewhere else."

Curious timing of the announcement

The announcement was published by the department at 7.22pm on Monday (21 January) – the eve of the crucial Brexit vote.

One analyst takes a similar view. "An after-hours announcement about the watering down of benefits for some pensioners the day before a pivotal day for the future of the country seems a little too convenient.

"It's bad news, let's face it and so burying it among a busy day of Brexit was bound to appeal. The problem is a little cut here, or a cost shaved off there all undermine confidence in pensions.

"At some point, the government will simply have to take the brave step of deciding how the pension system should be reshaped to be fit for the future."

However, Steven Cameron, pensions director at Aegon, says that most couples won't be hit to such a large degree.

"The latest changes to rules around new benefit claims for couples where one is above and one is below state pension age, illustrate just how complex the benefit system is.

"Claims that some 'mixed-age' couples could be £7,000 a year worse off suggest very substantial differences in pension credit and housing benefit for those below and above state pension age."

He adds: "Whenever there's a change to benefit entitlements, there can be those who feel they have lost out because they fall on the wrong side of a cut-off date.

"But sometimes changes are needed to ensure benefits are going to those in greatest need. This change will affect far fewer individuals than the increase in female state pension age.

"There, inadequate communication meant many thousands of women were surprised to find that because of their date of birth, they are having to wait up to five years longer before they can claim their state pension."

Mixed-age couples who are already claiming pension age benefits will not be affected by the change.

The decision to make the change was based on a parliamentary vote in 2012. However as recently as December 2018, the DWP had said that it was only 'considering' how to make the change.

This article was originally published in our sister magazine Moneywise. Click here to subscribe.

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